The terms money and currency are often used interchangeably, especially in causal conversation. We all call Bitcoin a cryptocurrency. But is it truly a currency? Or is cryptomoney a better term?

We can start to determine this first by defining the terms money and currency. We will skip over what makes a commodity money. Those have been discussed before, showing that Bitcoin is a commodity that can fulfill the role of money.

But what is money?

According to Grok, money has three characteristics:

1. It is a medium of exchange

2. It is a store of value, and

3. It is a unit of account.

To this, I would add that money has no counter-party risk. An apocryphal saying, attributed to JP Morgan, is “Gold is money, everything else is credit.” Given his philosophy and testimony, he meant credit requires trust in another party, gold and Bitcoin don’t require such trust.

Money is an abstract concept.

Bitcoin checks all four boxes, so I contend Bitcoin is money, or potentially money, if it is used as a medium of exchange.

Now, what is currency. Again, according to Grok, currency has three characteristics:

1. It is legal tender, that is, it is mandated by a government to be accepted for debts and taxes,

2. It is physical, digital, or official, in banknote form or in bank accounts, and

3. It is standardized, being issued and regulated by a central authority.

Currency is the concrete expression of the abstract concept of money. So all currency is money but not all money is currency. Grok provides the example of cigarettes in a prison economy, being money but not currency, used as a medium of exchange, but not issued by a government.

US gold coins are money, but not longer currency (unless you are foolish enough to exchange a $10 gold coin for $10 in groceries). Bitcoin is money (as discussed above), but is not currency, by the above characteristics (not legal tender, nor issued by a central authority).

While Grok claims that dollar bills and bank accounts are money by fulfilling the first three characteristics of money, they have counter-party risk. The bank notes (note is a financial term for an item of credit) can be demonetized at any time (see examples from other countries, such as India), or your bank may go under, locking you out of your account.

Bitcoin fails to meet, at least in the US, all the characteristics of currency, as listed above.

To the question asked by the title of this post, whether Bitcoin is money, or currency, or both, I would contend that Bitcoin, if used in exchange, is money. It has the potential to be currency, if it is made legal tender and we relax the rule about being issued by a central authority.

Right now, Bitcoin best fits the category of money, being a medium of exchange, a store of value, and a unit of account, while also having no counter-party risk.

So, cryptomoney, anyone?